nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒02‒09
eight papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Optimal insurance contracts with adverse selection and comonotonic background risk By ALARY David; BIEN F.
  2. Performance of the Dutch non-life insurance industry: competition, efficiency and focus By Jacob A. Bikker; Janko Gorter
  3. Towards an understanding approach of the insurance linked securities market By Mathieu Gatumel; Dominique Guegan
  4. An Adverse Selection Model of Optimal Unemployment Insurance By Marcus Hagedorn; Ashok Kaul; Tim Mennel
  5. Reformen auf der Suche nach Skaleneffekten: die Struktur der Verwaltungs- und Verfahrenskosten der öffentlichen Unfallkassen in Deutschland By Lukas Haag; Ashok Kaul
  6. Prospects for the Welfare State By Lindbeck, Assar
  7. Social interaction effects in an inter-generational model of informal care giving By Lisa Callegaro; Giacomo Pasini
  8. Grenzen des Wettbewerbs im Gesundheitswesen By Ingmar Kumpmann

  1. By: ALARY David; BIEN F.
    Date: 2008–01
  2. By: Jacob A. Bikker; Janko Gorter
    Abstract: This paper investigates competition in the Dutch non-life insurance industry indirectly by measuring scale economies and X-inefficiency, assuming that strong competition would force insurance firms to exploit unused scale economies and to push down inefficiencies. We observe substantial economies of scale (on average 11%) that are larger for smaller firms. Despite considerable consolidation in the industry over the last decade, scale economies have increased, as the optimal scale has outgrown the actual one. Comparing estimates across aggregation levels, we find that scale economies are smaller for groups and lines of business than they are for firms. Besides scale, focus and organizational form are important cost determinants as well: generally, specialized insurers have lower costs and face greater economies of scale. Estimates of thick frontier efficiency point to huge cost differences across firms and within lines of business. Overall, our results suggest that there is a lack of competitive pressure in the Dutch non-life insurance industry.
    Keywords: Non-life insurance, economies of scale, market structure, concentration, competition, X-efficiency, total cost function, aggregation: insurance groups, firms and lines of business
    JEL: D4 D61 G22 L1
    Date: 2008–01
  3. By: Mathieu Gatumel (Axa - AXA); Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I)
    Abstract: The paper aims to present the insurance linked securities market behaviour, that has changed a lot the past three years, both in terms of structure and in terms of ceded risks. After having introduced some stylized facts characterizing the insurance linked securities we capture their market price of risk, following the methodologies of Wang (2004), Lane (2000) and Fermat Capital Management (2005). A dynamical study of the insurance linked securities is also provided in order to understand the elements driving the spreads : the consequences of the catastrophic events, the seasonality and the diversification effects between some different risks are highlighted.
    Keywords: Insurance linked securities, cat. bonds, market price of risk.
    Date: 2008–01
  4. By: Marcus Hagedorn; Ashok Kaul; Tim Mennel
    Abstract: We ask whether offering a menu of unemployment insurance contracts is welfare-improving in a heterogeneous population. We adopt a repeated moral hazard framework as in Shavell/Weiss (1979), supplemented by unobserved heterogeneity about agents’ job opportunities. Our main theoretical contribution is an analytical characterization of the sets of jointly feasible entitlements that renders an efficient computation of these sets feasible. Our main economic result is that optimal contracts for “bad” searchers tend to be upward-sloping due to an adverse selection effect. This is in contrast to the well-known optimal decreasing time profile of benefits in pure moral hazard environments that continue to be optimal for “good” searchers in our model.
    Keywords: Unemployment Insurance, Recursive Contracts, Adverse Selection, Repeated Moral Hazard
    JEL: J65 J64 D82 C61 E61
    Date: 2007–03
  5. By: Lukas Haag; Ashok Kaul
    Abstract: We analyze the cost savings potential with regard to administration and management costs by merging Public Employment Accident Insurance Funds (Öffentliche Unfallkassen) in Germany. Our data base consists of the annual reports of the public statutory accident insurance funds from 1999 to 2005. Results of a multivariate regression analysis help to identify cost drivers and the potential existence of economies of scale. The numbers of employee accidents and pupil accidents as well as expenditures to prevent accidents serve as explanatory variables for administration and management costs. The main results are as follows. First, public accident insurance funds are very heterogeneous with regard to administration and management costs. Second, these cost differences are unrelated to the size of insurance funds (the number of insured employees and pupils). There is no evidence for cost savings of larger insurance funds, i.e., economies of scale. Third, accidents of pupils entail substantially lower management and administration costs than accidents of employees. Furthermore, there is evidence that higher expenditures to prevent accidents such as accident prevention programs also involve higher administration and management costs.
    Keywords: Reform der öffentlichen Unfallkassen, Verwaltungs- und Verfahrenskosten; Kostendegression, Skaleneffekte, Einsparpotenziale
    JEL: G22 M41
    Date: 2007–09
  6. By: Lindbeck, Assar (Research Institute of Industrial Economics (IFN))
    Abstract: It is useful to distinguish between exogenous and endogenous factors behind contemporary and expected future problems for the welfare state. This paper tries to identify major problems of both types and to indicate alternative reform possibilities to deal with them. At the same time as several governments struggle with such reforms, new demands on the welfare state emerge. Although the basic structure of today’s welfare-state arrangements certainly can be kept, the reforms required are sufficiently large to create considerable conflicts across interest groups.
    Keywords: Welfare State; Social Insurance; Human Services
    JEL: H40 H50 I38
    Date: 2008–01–31
  7. By: Lisa Callegaro (Department of Economics, University Of Venice Cà Foscari); Giacomo Pasini (Department of Economics, University Of Venice Cà Foscari; Economics and Organization, School for Advanced Studies in Venice)
    Abstract: We study jointly the health perception of the elderly and the care giving decision of their adult children. Social interactions play a crucial role: elder parents' health perception depends on relations with household members. On the other hand adult children make their care giving decisions strategically, meaning that each of them considers his siblings' decision. We find empirical evidence which support this claim using the 2004 wave of the SHARE survey. We estimate social interaction effects by means of methods taken from the spatial econometric literature. Health perception relation with care giving depends on the determinants of adult children's decision to care: Parents' health may be modelled as a common good for parents and children; the latter's decision may be driven by bequest motives or by pure altruism and/or cultural values. We test implications of the model thanks to the unique features of the SHARE dataset: it is trans--national, allowing to control for cultural and institutional differences, it contains information on health status of over-50 Europeans and details on their social and intergenerational relations.
    Keywords: Insurance, Social SHARE, care giving, social interactions, health, aging
    JEL: L26
    Date: 2007
  8. By: Ingmar Kumpmann
    Abstract: Many health economists demand more competition in the health care system. They focus on the competition between sickness funds for insured and the competition between health care providers for contracts with sickness funds. But they neglect the competition between health care providers for patients which is crucial for medical quality. This third field of competition is in conflict with the two former fields. The empirical evidence concerning the effects of competition on cost and quality is also ambiguous. Thus the mere claim for “more competition” does not do justice to the high complexity of the health care system.
    Keywords: health care system, competition, sickness funds, free choice of medical practitioner
    JEL: I11 I18 D61
    Date: 2008–01

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